Mathematics · Absorption and Marginal Costing
The overhead absorption rate for Product Y is $2.50 per direct labour hour. Each unit of Y requires three direct labour hours. Inventory of Product Y at the beginning of the month was 200 units and at the end of the month was 250 units. What is the difference in the profits reported for the month using absorption costing compared with marginal costing?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1The absorption costing profit would be $1,875 greater
- 2The absorption costing profit would be $375 greater✓
- 3The absorption costing profit would be $125 greater
- 4The absorption costing profit would be $375 less
Correct answer
The absorption costing profit would be $375 greater
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